May 2020 Q3 c.

Overtime

• Where an employer makes a payment for overtime work to a qualifying junior employee during a year of assessment, and the payment is up to 50% of the basic salary of the employee for the month, the employer is required to withhold tax at the rate of 5% from the payment. Any excess above the 50% is taxed at 10%.
• A junior employee is the one whose qualifying employing income does not exceed eighteen thousand currency points (GH¢18,000.00) per annum.                                                     (2 points @ 1.5 marks = 3 marks)

Bonus Payment
Where an employer pays a bonus to an employee during a year of assessment and the sum of the payment during the year:

• Does not exceed 15% of the annual basic salary of the employee, the employer is required withhold tax from the gross amount of the payment at the rate of 5%
• Exceeds 15% of the annual basic salary of the employee, the employer shall:
  * add any excess above the 15% payments to the employment income of the employee for the year, and
  * withhold tax from the payment in accordance with the income tax rates for resident individuals (i.e. the graduated rates)
• Tax withheld under overtime and bonus is a final tax on the overtime or bonus payment and the payment shall not be included in calculating income derived by the employee from that employment.
• Where an employer makes a payment for overtime to an employee who is not a qualifying junior employee, the payment would be included in calculating the income of that employee from the employment and taxed at the graduated rates.

(4 points @ 1 mark each = 4 marks)